The new year is off to a relatively cool start to the markets, with positive overall trends domestically but overseas markets considerably weaker. The strong U.S. showing last year only tells part of the story, though, as large swaths of the investment markets were negative, including bonds, commodities, and large foreign economies like China, India, Russia and Brazil.
As we mentioned last month, bull markets (large positive trends) tend to last somewhere in the neighborhood of five years, and with the current run having started in March 2009, the five-year anniversary is nearly upon us. More than ever, it is important to be aware of future turning points and adjust your portfolio accordingly – it would be a mistake to believe that this market is any different. In fact, the last two bull markets both ended after five-year runs, resulting in losses ranging from 45 percent to as much as 55 percent.
clearTREND offers monthly market analysis and research on Northeast Wisconsin’s key economic sectors. For February, we highlight the commercial lending and construction services sectors of the economy – both currently showing positive trends. We also feature the largest employment sectors for Brown County.
This month’s clearTREND U.S. Economic Health IndexTM shows extreme strength, with 89 percent of U.S. economic sectors expanding (an excellent reading, up from 86 percent a month ago and currently our highest reading ever). Couple that with a sizable drop in the number of contracting sectors, now only 8 percent compared with 6 percent in January. “Let’s be clear that when things can’t get any better, by definition they can only get worse,” says Mark Scheffler of The Appleton Group. “Major market tops are often characterized by an irrational advance, and that’s often when novice investors are getting in just as smart investors are exiting. It’s time to be smart.”
Evidence of slowing upward trends can be found in the Select Trending U.S. Sectors report. Half of recent changes have moved from “buy” to “cash,” indicating that all of the good news in these key sectors is already priced in. This includes business training, coal, industrial suppliers (a good barometer for the economy), personal products and real estate investment. This last sector is particularly interesting, as the Construction Services report below shows all “buys.” Can anyone say “market saturation?”
Click here to view this month’s economic data in our digital issue.